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Transferring Development Rights Across Zoning District Boundaries in New York City – When is it Allowed?
As the real estate development market continues to improve to near pre-recession levels, property assemblages, which typically include the acquisition of development rights (a/k/a air rights) from adjoining parcels, are becoming more common in the outer-boroughs of New York City. Sometimes the development rights parcels (from which the "air rights" will be obtained) and the parcels to be developed with the new building are located in different zoning districts.
Under Article 7, Chapter 7 of the New York City Zoning Resolution, the general rule is that you cannot transfer floor area across zoning district boundaries. However, there are some exceptions to this rule for zoning lots that existed before the date the zoning district boundary was created (i.e. "pre-existing lots"), which allow you to average the floor area across the "pre-existing lot" or in some instances shift the zoning district boundary to the lot line. Moreover, there is an additional court-affirmed exception to the prohibition on the transfer of floor area where the permitted floor area for the use to be developed is identical in different zoning districts. In such instance, the floor area generated in one zoning district may be transferred to and developed on the portion of the zoning lot located within the other zoning district. See Matter of Beekman Hill Association v. Chin, 274 A.D.2d 161 (1st Dep't 2000).
It is critical that a full zoning analysis be performed when considering the acquisition of development rights as part of an assemblage to ascertain, among other things, the applicable zoning districts and when they were established, the history of the lots involved, and the maximum floor area for the use to be developed. Depending upon the outcome of such an analysis, it is possible that the transfer of development rights will be prohibited, permitted, or somewhere in between. Given that the viability of most development projects depend upon the maximum floor area yield, this analysis should be completed as part of any initial due diligence.
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